Monday, 15 November 2010

Have the right-wing blogs changed their minds about Ireland?

The Irish government officially denies that it will need, or is seeking, an EU-led emergency bailout, though it has begun talks with the European Central Bank, European Commission and other governments about the modalities of that entirely hypothetical scenario. We can expect to hear much more about this in the next few days.

It was not meant to end like this - especially if you rely on the major right-wing British political blogs for your economic and political analysis.

By coincidence here in Ireland it was also budget day, the Finance Minister Brian Lenihan delivered a 7% cut in public expenditure to match the 7.5% fall in GDP in 2009. To equal that Alastair Darling would need to have announced £40 billion in public expenditure cuts today.

Here are some of the reasons Guido thinks Ireland will bounce back faster than the UK ...

Paul Staines, founder of the Guido Fawkes blog, had the advantage of local knowledge. His view was heartily endorsed by Iain Dale, also seeing Irish austerity as the most important model for George Osborne.

Guido is right. The PBR the British Chancellor should have delivered, was delivered yesterday in Dublin. Hopefully George Osborne is studying it in great detail.

The think-tank Reform shortlisted Irish Finance Minister Brian Lenihan as "reformer of the year", for getting to grips with his country's deficit.

In our everyday lives we do not borrow to pay for our household bills. We cut back and seek to live within our means. The same strictures apply at national level.

(Hannan stands by that, blogging yesterday that he still thinks the Irish 2009 budget was one of "brave and necessary cuts", but that they can't bring a recovery while the country remains in the euro. And Hannan does deserve credit for being willing to respond to Next Left's earlier inquiries about whether he had changed his mind about advocating Icelandic deregulation following that country's economic collapse).

There are differences between the Irish and British economy. But, remember, what the main right-wing blogs argued was both that the austerity measures were right for Ireland, and the most important model for Britain, so I am not sure this is a persuasive counter-argument for those who made those arguments.

So, in the spirit of intellectual inquiry, we would put three questions for Guido Fawkes and Iain Dale.

1. Do they think they were wrong about Ireland? With the benefit of hindsight, is there anything they might now change in their advocacy of Irish austerity, or does the argument still basically stand up?

2. Has the experience of Ireland over the last year led them to change their mind about any important issues? Does it support the argument that deficit reduction strategies need to balance different risks?

3. Having been clear that there were important lessons from Irish austerity a year ago, would they identity any lessons for the British economic recovery from what has happened since?

We will happily publish or link to any responses here, and invite further debate and responses on what we can and can't hope to learn from the Irish predicament.

A good piece, though you could argue a bit too much effort spent on calling to account Iain Dale, who really makes no pretence at understanding economics and is merely a parrot on matters such as this.

More important is what Cameron has said on how the UK differs from Ireland (as reported on the Guardian Seoul liveblog). He said that the key advantage the UK has is its currency and interest rates flexibility.

As regards currency, this is surely an implicit acknowledgement that the UK is able to do better than Ireland because it can take steps to devalue its currency, making a mockery both of its pre-election populism about the need for a strong pound, but more importantly acknowledging that it's 'there is no money left' (Byrnian) narrative is based on falsehoods about what money really is in the modern (post Gold Standard) world.

They could not just continue 'supporting the economy' as those who seem to live in some Keynesian fantasy land seem to wish. Their economy fell off a cliff, if they hadn't cut they would have just ended up in the same place as Greece at about the same time. And nothing would have been gained. They would have to have cut exactly the same and have burdened all the rest of Europe with another bailout.

The Irish have done the honourable thing. What this really shows is the insanity of the EU and the Euro.

The point, Guido, is that for the Irish economy to be held up by Cameron as the poster boy for "tough but fair" economics and then for it to crash so spectularly undermines their cause.Interestingly the Telegraph today reports that the Irish are fearful that an EU bailout will make them put their taxes up. After 30 years of IMF bailouts coming with the condition that taxes go down, it seems a little odd that the EU is now demanding the opposite.Read my daily paper review at: http://cynicaljournalist.wordpress.com/

The post inquires as to whether or what if anything Guido Fawkes or Iain Dale would now want to change about the prediction, under a year ago, that "Ireland would bounce back quicker than the UK".

A longer conversation about what the causes and consequences are is interesting, as I suggest at the end, but I wasn't attempting that at the outset.

However, the euro was mentioned in the post, reporting Daniel Hannan's argument, which is the last but one sentence before the one you quote. But the Guido prediction last December did not say "but only if they leave the euro"; it said euro Ireland would bounce back quickly as a result of the austerity budget. (Guido also now cites the protection of bank speculators as well as investors as his reason why that didn't happen).